So Bitcoin Might Fork. Here’s What to Expect…

It is with some lament that I write this. If everyone agreed on a path forward, then there would be no need for this post, but here we are. There is a strong likelihood that we will need to know what will happen if Bitcoin forks (again). There is a chance that the protocol of Bitcoin will fork, which will cause a chain fork as well. (I discussed hard forks & soft forks from my perspective in a previous post.)

Some Bitcoin miners are signaling that they would accept one of two competing Bitcoin protocol changes: one protocol is Bitcoin Unlimited (BU), which would increase the maximum transactions that Bitcoin can process by 100%. The other protocol, called Segregated Witness (SegWit), is expected to increase this maximum by 70%. As of this writing, 35.9% of blocks are signaling for Bitcoin Unlimited while 26.8% are signaling for SegWit.

Bitcoin miners signaling for Bitcoin Unlimited and SegWit blocks

Bitcoin blocks found by miners signaling Bitcoin Unlimited support vs. miners signalining SegWit support

Bitcoin Unlimited vs. SegWit: Abstractly, what is happening?

Let’s make a hypothetical situation where the proportion of Bitcoin Unlimited to SegWit votes stays the same, but is extrapolated out so that ALL Bitcoin miners MUST choose either Bitcoin Unlimited or SegWit. That would mean around 55% of miners would be supporting Bitcoin Unlimited and 45% of miners would be supporting SegWit. (There is an incentive to go with the “winning” majority chain, so this division of hashing power could be even more severe at the time of a hard fork.)

If Bitcoin Unlimited activated and a block over 1MB was mined, then the SegWit part of the network would reject this block and build off the previous block. With a drastic drop in hashing power but no change in the difficulty target, it would take the Bitcoin network longer to find the winning solution that confirms a new block to the blockchain. With our hypothetical numbers, blocks for Bitcoin Unlimited would come out approximately every 18.2 minutes and SegWit blocks would come out approximately every 22.2 minutes. Any transaction capacity increase promised by Bitcoin Unlimited and SegWit would be delayed until the difficulty target adjustment shakes out. As more blocks were found, the difficulty of each chain would adjust and after about a month (a little longer for SegWit), the 10-minute block time target would be restored.

How would this hard fork affect Bitcoin users?

A Bitcoin user with coins before the hard fork would then be considered to have a positive balance on both ledgers/blockchains after the hard fork. (The Ethereum blockchain forked after last year’s DAO debacle, yielding ETH tokens and ETC tokens (Ethereum Classic) for users who owned ETH before the fork.) But without taking care, a user could intend to spend coins on one chain and unintentionally spend on both chains; this is known as a replay attack, though it’s really not an attack if it’s done unintentionally. Maybe that should be called a replay error so as to not be confused with an intentional replay attack meant to defraud.

How does one guard against a replay attack after a hard fork?

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Score One for Consensus, Maybe?

Today it was announced by eight major players in the bitcoin space that they would be running software that is comparable with BIP101 by December of this year. If BIP 101 is adopted, then the capacity of the bitcoin network would octuple, and be followed by scheduled capacity increases.

Of the five main developers, Pieter Wuille of Blockstream supports a modest network capacity increase in 2017 long after a transaction backlog is expected. Gregory Maxwell also of Blockstream also opposes BIP 101. Jeff Garzik promotes his BIP 100 but is concerned about inaction if BIP 100 isn’t accepted. Wladimir J. van der Laan also has a BIP proposal that is not numbered yet. While Gavin Andresen has helped release software called Bitcoin XT that will implement BIP 101 not before January 2016 only if the network supports the change.

There are other developers that have weighed in on this topic. There’s Mike Hearn who originally wrote Bitcoin XT. When Bitcoin XT was first written, it did not change the capacity of the bitcoin network. BitcoinXT was the first client that would support the lighthouse project which allows crowd funding campaigns with bitcoin. It was Mike Hearn who agreed to implement BIP101 in Bitcoin XT with the help of Gavin Andresen.

Other developers currently against BIP 101 include Peter Todd, and Luke-jr.  With so much division it has been impossible for Bitcoin Core to adapt to bitcoin’s expected growth. This fact is probably responsible for the hundreds of Installations of Bitcoin XT and  a few BIP101 blocks that were mined last week.  Some reaction to this divergence from Bitcoin Core spurred many comments about consensus.  There was a growing concern that this sequence of events would lead away from consensus.

Alas, these concerns may not be valid. As there is now a workable, and fairly convenient solution to allow for the growth of the network. This could serve as a rally point. People may now see a path to the next generation bitcoin network. There seems to be no indication the bitcoin core team will not break out of its division and inaction that has plagued that team for over two years. In fact Luke-jr has even suggested that he might change his mind. Could this be the very beginning of the building of a consensus that some people have been clamoring for? Time will tell, time will tell.

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Episode 33 – Mattheus and Pedro

Mattheus and Pedro join JJ for this episode : More businesses using bitcoin including Overstock.com in 2014 : Native American Reservations looking to skit bitcoin regulations : iOS 7 jailbreak allows users to use bitcoin apps : BTC-China :

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Securing the network

The person or people claiming the name Satoshi Nakamoto solved a difficult problem. There was a certain amount of creativity required, and a simplistic beauty in the solution. Like many times when a elegant solution is announced, more problems become apparent. It is the very nature of solutions that they expand what people can think about and hence lead to more unanswered questions. In this way, the chain of discoveries progresses on.A real picture of a bitcoin

Satoshi is not immune to this process of answers leading to more questions. We have seen the successful implementation of Bitcoin, which has led to more problems. One such problem is that fees for transactions are static and not dynamically adjusted as demand for block space or market conditions change. Another such problem is blockchain bloat, which every user that downloads the reference client experiences as they loose over seven gigabytes of free space on their hard drive. Another problem is that unsuspecting users get very small payments many times, these payments can’t be spent as they will not cover the fee of a transaction that will be several kilobytes in size. Of course, there is a viewpoint that these are not problems at all, but rather suboptimal solutions.

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